Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Soon after US President Donald Trump's opening salvo of his
Speaker 2: second trade war, hitting more than five hundred billion dollars
Speaker 2: worth of Chinese goods with a ten percent tariff, China
Speaker 2: retaliated with tariffs of its own, So yeah, r escut
Speaker 2: It imposed ten to fifteen percent levees on fourteen billion
Speaker 2: dollars worth of American goods, including coal, crude oil, and
Speaker 2: cars with larger engines from the likes of GM and Ford.
Speaker 2: Those tariffs went into effect Monday, February tenth.
Speaker 3: China's retaliatory tariffs on fourteen billion dollars of US goods
Speaker 3: also due to kick in today.
Speaker 2: And within hours, Trump slapped a twenty five percent tariff
Speaker 2: on all steel and aluminium imports, industries dominated by China.
Speaker 1: So if it's made in the United States, there is
Speaker 1: no tariff. What you have to do is make it
Speaker 1: in the United States.
Speaker 4: We don't need it from another country.
Speaker 2: Jenny Marsh, who oversees Bloomberg's coverage of Greater China economy
Speaker 2: and politics, says President Si Jinping doesn't appear to be
Speaker 2: flustered by the flurry of tariffs coming from Trump.
Speaker 5: You know you saw Tudor and Mexico's leader both rushing
Speaker 5: together on the phone striking these deals. Chi Jinping setting
Speaker 5: a very sort of cool, calm, collective signal that he
Speaker 5: isn't going to be doing the same thing, like he's
Speaker 5: a much bigger fish, and China's going to respond to
Speaker 5: its own way.
Speaker 2: And Bloomberg opinion columnist Sruly Wren says, China's response this
Speaker 2: time is very different from the first trade war in
Speaker 2: twenty eighteen.
Speaker 3: China is in a much weaker position than twenty eighteen
Speaker 3: when President Trump started his first trade war. What happened
Speaker 3: is that the Chinese economy has become more reliant their
Speaker 3: exports than ever before, and China really doesn't want to
Speaker 3: kill the only bride spot in its economy.
Speaker 2: Welcome to The Big Take Asia from Bloomberg News. I'm wanh.
Speaker 2: Today in the show, we unpacked China's response to Trump's
Speaker 2: barrage of tariffs. Can China avoid a full blown trade
Speaker 2: war with the US, and what's at stake for both
Speaker 2: countries going forward.
Speaker 4: We have one very big power over China, and that's tariffs.
Speaker 2: In the past few weeks, President Trump has proposed and
Speaker 2: delayed twenty five percent tariffs on Canada and Mexico. In comparison,
Speaker 2: the tariffs on China are much lower at just ten percent.
Speaker 2: But Trump says he's just getting started.
Speaker 1: That was just an opening salvo. If we can't make
Speaker 1: a deal with China, then the tariffs who will be very,
Speaker 1: very substantial.
Speaker 2: Jenny, and truly thanks for joining us. Let's get into it.
Speaker 2: In the first trade war, the US and China imposed
Speaker 2: of tit for tat tariffs on each other. Eventually things
Speaker 2: calm down a bit when the two signed a trade
Speaker 2: deal in twenty twenty. We're China basically committed to buying
Speaker 2: more goods from the US. Now, what does Trump really
Speaker 2: want from China this time around? How is it different
Speaker 2: from the first trade war?
Speaker 5: Well, he says he wants to rebalance trade, and I
Speaker 5: think last time that meant getting China to buy more
Speaker 5: from the US. But this time it seems broader. It
Speaker 5: seems like what he actually wants is to get manufacturing
Speaker 5: back on American shores. He really wants to return America
Speaker 5: to this sort of like manufacturing powerhouse it used to be.
Speaker 5: I think the interesting thing is that trade war won,
Speaker 5: and it was all about China, Whereas this time around,
Speaker 5: that's his goal rebalance trade, but with everybody to sort
Speaker 5: of take aim at all these different sort of partners
Speaker 5: and economies of America trades with to bring manufacturing back
Speaker 5: to the US. So it's sort of a much more
Speaker 5: ambitious and wide ranging doctrine that he's trying to roll
Speaker 5: out this time around.
Speaker 2: Now, after you were tarras of ten percent on Chinese
Speaker 2: goods took effect last week, Beijing responded with its own
Speaker 2: round of tariffs. Truly, can you walk us through China's reaction?
Speaker 3: It seems like China's response is quite muted this time.
Speaker 3: Instead of reciprocated ten percent broad based the teriff back
Speaker 3: on the US, China basically targeted a few things like
Speaker 3: oil and natural gas, and it also launched the Toothlip's
Speaker 3: anti trust probe into Google, which basically left China more
Speaker 3: than a decade ago. It really compared to twenty eighteen,
Speaker 3: the response was very muted.
Speaker 2: And what's the rationale behind such a muted response, you think?
Speaker 3: I think the problem with China is that this time
Speaker 3: around twenty twenty five, China is in a much weaker
Speaker 3: position than twenty eighteen, when President Trump started his first
Speaker 3: trade war. China had a notorious COVID zero lockdown, right,
Speaker 3: and after China exited the COVID zero lockdown in late
Speaker 3: twenty twenty two, what the middle class discovered was that
Speaker 3: the economy had long COVID as well. You know, like
Speaker 3: we are four years into the property downturn, and you
Speaker 3: still see those unfinished apartment buildings pappered across China. These
Speaker 3: developers they have already gone defunct, right, and the government
Speaker 3: is not stepping in to finish those buildings and deliver
Speaker 3: presole units to households. Basically, the Chinese people just say, okay,
Speaker 3: the government doesn't care about consumer rights and saving deposits
Speaker 3: basically doubled from twenty eighteen to twenty twenty five, and
Speaker 3: youth unemployment is in double digits. People have money, they're
Speaker 3: just not spending it. As a result, in twenty eighteen,
Speaker 3: consumption accounted for two thirds of China's economic growth. Now
Speaker 3: it's not even one third.
Speaker 2: So basically, in twenty eighteen, China was in a much
Speaker 2: stronger position economically to respond, where they could say the
Speaker 2: Trump's tearuffs, fine, we can take a hit on exports
Speaker 2: because we can rely on the strong Chinese consumers. But
Speaker 2: now in twenty twenty five, Chinese economy is slowing. You've
Speaker 2: got Chinese consumers not spending. China's domestic demand has drunk
Speaker 2: so much that China has to rely on exports to
Speaker 2: absorb all that production.
Speaker 3: Right, Yes, so China thought it was prepared, right, it
Speaker 3: was trying to beef up its own self reliance in
Speaker 3: the supply chain. But in fact, by ignoring the middle
Speaker 3: class and by failing to foster a strong consumer culture,
Speaker 3: China is actually more vulnerable than before because in the
Speaker 3: global trade war, the economy that has the most powerful
Speaker 3: consumer base basically wings and Donald Trump knows that. Right,
Speaker 3: he can threaten terroriffs and say really nasty things on
Speaker 3: the global stage because he can basically shut off the
Speaker 3: access to the world's most resilient consumers, Americans, and China
Speaker 3: no longer has that.
Speaker 2: Jenny on the US side, what do you see as
Speaker 2: the biggest difference between Trump's latest trade war and the
Speaker 2: one in twenty eighteen.
Speaker 5: I think for Trump, this is faster and more furious
Speaker 5: than it was the first time around. First time around,
Speaker 5: and we had investigations, it was quite slow walking. First
Speaker 5: day in office. Is Bam, it's coming quick and it's broader.
Speaker 5: I think for China, I think they've been here before,
Speaker 5: and last time, during the last trade war, they unleashed
Speaker 5: this sort of wolf warrior tactic that was going toe
Speaker 5: to toe with Trump on the rhetoric, swinging back to
Speaker 5: every tweet he said, and I think they realized I
Speaker 5: did them no favors because that wolf warrior approach didn't
Speaker 5: go down well with other countries, and it just meant
Speaker 5: that Trump hit back all that bit harder. And I
Speaker 5: think this time they have learned from it and they're
Speaker 5: going to be very careful. So I think it was
Speaker 5: just they've had four years to think about this and
Speaker 5: how they do things differently this time around, and so
Speaker 5: I think they are coming back with a much more
Speaker 5: considered response. Last time they were just responding to the
Speaker 5: chaos of Trump when everyone was getting to know what
Speaker 5: Trump was like, and now they have a much better
Speaker 5: read on him and sort of how to protect themselves.
Speaker 2: So how can China protect itself? I mean, there's been
Speaker 2: tark about it behaving like the more sensible adult in
Speaker 2: the room. Will that help it to avoid a full
Speaker 2: blown trade war?
Speaker 3: I wouldn't necessarily call China being the adult in the room.
Speaker 3: I guess this time around, they are just trying to
Speaker 3: play a little bit smarter. Instead of going in a
Speaker 3: hard boxing match with Trump, they are playing basically the
Speaker 3: Chinese taichi. They're just trying to play soft and the
Speaker 3: elusive and the hope that the Trump will self destruct
Speaker 3: in the meantime.
Speaker 2: If China's approach is like slow Tai Chi on tariffs,
Speaker 2: Trump is taking the opposite tack. On Monday, Trump doubled
Speaker 2: down and slapped a twenty five percent tariff on all
Speaker 2: steel and aluminum coming into the US. China doesn't export
Speaker 2: a lot of these metals directly to the US, but
Speaker 2: it does dominate the global steel and aluminum industries and
Speaker 2: sells its products to countries like Canada and Mexico. They
Speaker 2: then process the metal and sell it on to the US.
Speaker 2: So while the tariff is not directed China, China and
Speaker 2: as trading partners, do end up taking the hit. After
Speaker 2: the break, we'll look at how She's handling Trump's tariffs
Speaker 2: and what China's trade war game plan could look like.
Speaker 2: Even though China's economy today is in a much more
Speaker 2: fragile state than it was in twenty eighteen. That doesn't
Speaker 2: mean that it's out of options when it comes to
Speaker 2: fighting a trade war, Bloomberg. Shuly Wren says, in the
Speaker 2: years since Donald Trump first launched his tariffs, Beijing has
Speaker 2: been working to prepare the Chinese economy for a second strike.
Speaker 3: In twenty eighteen, the trade war that President Trump launched
Speaker 3: basically was unexpected, right, and a lot of Chinese exporters
Speaker 3: they were hurt, for sure. But these days they are
Speaker 3: trying very hard to diversify the opening factories around the world.
Speaker 3: Basically have moved all everywhere, to Mexico to Vienna.
Speaker 2: Besides moving supply chains outside of China, Truly, says, China
Speaker 2: has also reduced reliance on exports to the US. Back
Speaker 2: in twenty eighteen, the US accounted for close to twenty
Speaker 2: percent of China's exports. Now it's only some fifteen percent. Suly.
Speaker 2: What more tools or other tools does China have and
Speaker 2: its kit to deploy against Trump's trade war compared to
Speaker 2: twenty eighteen.
Speaker 3: Well, China has TikTok this time. Basically it could be
Speaker 3: a good will towards Trump, because Trump has talked about
Speaker 3: wanting to have TikTok for cheap, and perhaps the social
Speaker 3: media can go IPO in New York and the US
Speaker 3: government can make quite a bigger profit out of it.
Speaker 3: So that's one tool that China could use and say, hey,
Speaker 3: let me give you a nice gift. How about making
Speaker 3: one hundred percent return on a bigger social media platform.
Speaker 3: There are other tools that the Shi Chimpin could use,
Speaker 3: but none of them will be very palatable to him.
Speaker 3: For instance, the first time around, China did use the
Speaker 3: un it cheapened its currency to counter Trump's twenty five
Speaker 3: percent terraff. This time around, China could still do that,
Speaker 3: but the pressure of capital outflow is just that much stronger.
Speaker 3: The economy is not doing very well. Investment returns in
Speaker 3: China are very dismal, and people naturally want to put
Speaker 3: money out of China. And if you weaken your currency
Speaker 3: by another, say ten to fifteen percent, the pressure of
Speaker 3: outflow it will just be that much greater. Another tool
Speaker 3: is perhaps using stimulus, the big one that China did
Speaker 3: after the global financial crisis. Again, it's not a good
Speaker 3: option because China's decked to GDB racial is already at
Speaker 3: three hundred percent. It's one of the world's most indebted nations.
Speaker 3: So if we're talking about stimulus, we will have to
Speaker 3: talk about perhaps five percent of GDP every year for
Speaker 3: years to come, and that's going to add even more
Speaker 3: debt to the economy.
Speaker 2: Now, China has a reputation for playing the long game,
Speaker 2: while the US, on the other hand, seems to have
Speaker 2: a much shorter attention span. How do we think that
Speaker 2: tilts the balance in these trade negotiations?
Speaker 3: I mean present shating Ping of course thinks he has
Speaker 3: a lot more time to burn them present charmp Right,
Speaker 3: he's only seventy one year old, and he doesn't face
Speaker 3: term limits, not anymore, right, so he thinks he might
Speaker 3: have a long game. But I am worried that the
Speaker 3: government in Beijing could be a little bit too complacent.
Speaker 3: What if China's economy just collapsed over the next four years.
Speaker 3: There is systemic risks in China.
Speaker 2: Here's Jenny Marshagan.
Speaker 5: I think that's right. I mean, I think beijing strategies
Speaker 5: just damage limitation. Let's just try and get through the
Speaker 5: next four years with as little damage as possible. They
Speaker 5: know they're going to be tariffs, And I also wonder
Speaker 5: if thinking at where the opportunities might be for them,
Speaker 5: because this time around, they're not the only target for Trump.
Speaker 5: He's going to target the European Union. He said, he's
Speaker 5: making these extraordinary expansionist claims. He wants to sort of
Speaker 5: buy Greenland and take over the guards of strip. That's
Speaker 5: going to go down, you'd think very badly in the
Speaker 5: global South. So for China, is there an opportunity there?
Speaker 5: One of the biggest things of Biden achieved was sort
Speaker 5: of getting the allies to come all in line with
Speaker 5: US policy. And if that's all going to fraction, now,
Speaker 5: can Beijing Brussels closer make amends with South Korea and Japan?
Speaker 5: So I imagine they'll sort of be looking for like
Speaker 5: where they can actually win during this trade war?
Speaker 2: And how would Trump counter attack in this trade war?
Speaker 2: If he senses that China's gaining the upper hand, are
Speaker 2: we going to see him wheel tariffs with more force
Speaker 2: this time around?
Speaker 5: All indications are yes, But then the caveat is Trump
Speaker 5: is so unpredictable the amount of uturns. He's already done.
Speaker 5: He's given Mexico and Canada this reprieve, and he's had
Speaker 5: four years to think about tariffs and what he didn't
Speaker 5: achieve last term, and he's got this sort of strong
Speaker 5: cabinet around him. He's got he's loyalists, people who was
Speaker 5: singing from the same hymn sheet, and he has much
Speaker 5: stronger mandate as well to do all of this.
Speaker 2: Now, surely do you think there could be other ways
Speaker 2: that Trump could try to target China where it hurts.
Speaker 3: Terriff is a very obvious choice for him, but there
Speaker 3: are other things that he can paint China on Presenting
Speaker 3: Pin cares very much about upgrading China's industrial sector right,
Speaker 3: and he can impose more export controls on China, and
Speaker 3: that hurts the sentiments back in China. Basically presenting Pain
Speaker 3: likes to portray himself as a big character on the
Speaker 3: world stage, and in China people don't call him directly
Speaker 3: by name. They call him Dada basically means mister big.
Speaker 3: And he has talked a big game. He has talked
Speaker 3: about China dream right, and China establishing a multipolar world
Speaker 3: and not being dominated by this one big bully in
Speaker 3: the United States. Basically, but I'm not sure that his
Speaker 3: deeds have been matched by his words. Let's take a
Speaker 3: look at the economy. It's not going anywhere, right, He
Speaker 3: tried to buffer China against the external shocks after the
Speaker 3: twenty eighteen trade war, and the Chinese economy is more
Speaker 3: vulnerable than ever.
Speaker 1: Now.
Speaker 2: What can we expect in the weeks and months to
Speaker 2: follow on tariffs?
Speaker 3: A lot of back and forth negotiations, and I suspect
Speaker 3: President Trump is going to paint him.
Speaker 5: You know, there's this April one deadline, the trumpetermenication to
Speaker 5: report back to Trump on the first trade war, and
Speaker 5: once that happens, then I think sort of full more
Speaker 5: negotiations will start with China, So we'll have a restart
Speaker 5: of those sort of trade war talks we had last time,
Speaker 5: and it'll be interesting to see who she didn't think
Speaker 5: puts forward this time.
Speaker 2: Do you see anyway for the US and China to
Speaker 2: avoid the full blown trade war.
Speaker 3: I don't at this point. I think the deflationary pressure
Speaker 3: in China is so strong that Chinese companies will be
Speaker 3: very keen to export their products and services to the
Speaker 3: rest of the world, especially to the US, because profit
Speaker 3: margins are just that high, and that if President Trump
Speaker 3: really clears up while protecting US labor, he is going
Speaker 3: to use terraffs and the trade war to stop basically
Speaker 3: China eating the world.
Speaker 2: What are the risks you see beyond trade? If the
Speaker 2: US is the instigator of trade wars with multiple countries,
Speaker 2: does this in any way leave room for China to
Speaker 2: step up on the world stage.
Speaker 5: Trump is basically saying things which is so shocking to
Speaker 5: sort of the rules based world order that America has
Speaker 5: been the custodian of for decades, talking about taking over
Speaker 5: the guards a strip or buying Greenland, or even annexing Canada.
Speaker 5: This sort of does create some room, you think, for
Speaker 5: Beijing to sort of amp up its rhetoric around Taiwan.
Speaker 5: The US has been the leading figure opposing Chooting Ping's
Speaker 5: territorial kind of rhetoric around Taiwan, his ambitions to take Taiwan.
Speaker 5: And if you then have a US leader who himself
Speaker 5: has all these sort of empire building aspirations, that makes
Speaker 5: it much harder for the US to sort of have
Speaker 5: the moral high ground to be trying to restrain China.
Speaker 5: I'm restrained. She That doesn't mean she didn't. Ping's gonna
Speaker 5: invade Taiwan anytime soon, but it just means he's got
Speaker 5: a little bit more space now around that issue. And
Speaker 5: I think that could be a dangerous.
Speaker 2: Thing, Jenny, and truly thanks so much for sharing your
Speaker 2: insights with us. This is The Big Take Asia from
Speaker 2: Bloomberg News.
Speaker 3: I'm wan ha.
Speaker 2: This episode was produced by Young Young, Naomi Um and
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